HSA and Retirement Savings

Our friends at the Healhcare Trends Institute have provided some great insight into the value of HSA plans towards retirement planning.  If you are considering an HSA plan for your clients or your business please contact our sales team right away to find out why an HSA with HRC Total Solutions is a great choice!

Everyone is often so busy with their day-to-day tasks that it’s hard to think past what you’ll be doing tomorrow, let alone 20 or 30 years from now. But this interesting statistic about retirement will give you moment to pause. According to Fidelity Investments, a 65-year-old couple retiring last year will need about  $220,000 to cover future medical bills in retirement.

Now you consider that statistic in conjunction with a finding from Employee Benefit Research Institute that notes 60 percent of workers report that they or their spouses have saved only $25,000 or less for retirement (not including pension plans or the value of their homes). So where’s that money for healthcare costs going to come from?

For some, it can start with a health savings account. While more employers are turning to high deductible health plans to keep in check current health benefit costs, for employees the additional value comes from the health savings account portion that can be used to help save for retirement medical costs.  The employee funds the HSA while they are active and working and then uses the money later in life, realistically when they’ll probably have more medical expenses.

With this strategy the younger you are the better, and the wiser you are about investing the more it will help you. Here’s why.

According to an example in the February issue of Workforce magazine, a person who contributes the maximum amount of $3,350 for 40 years and acquires a 2.5 percent ROI could save $360,000. Great. Now if that person earned 5 percent on his account each year his savings would be at $600,000 and over $1 million if 7.5 percent could be earned yearly until retirement.

With this example though, the employee cannot take any money out to pay for current healthcare costs. This may be tough for some participants. For those that can, the numbers above are pretty impressive. It’s the reason employers, health benefit advisors, financial institutions, etc. need educate and engage their audiences about the value of HSAs.

And remember, HSAs are designed so that you can pay for health bills today and save over time. Even if you use some of your account money, the rest is still growing exponentially, tax-free for you to use in the future.

(Source: Healthcare Trends Institute http://www.evolution1.com/healthcare-trends-institute/the-power-of-hsas-for-retirement-savings/)

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